ANNUAL INFORMATION FORM For the year ended December 31, 2016

Transcription

1 ANNUAL INFORMATION FORM For the year ended December 31, 2016 March 29, 2017

2 REGARDING FORWARD-LOOKING STATEMENTS This Annual Information Form ( AIF ) contains forward-looking information, within the meaning of applicable Canadian securities legislation, which reflects management s expectations regarding Teranga s future growth, results of operations (including, without limitation, future production and capital expenditures), performance (both operational and financial), business prospects and opportunities (including the timing and development of new deposits and the success of exploration activities), the proposed plans with respect to mine plan, anticipated 2017 results, mineral reserve and mineral estimates, anticipated life of mine operating and financial results and the completion of construction of future deposits related thereto and opportunities. Words such as plans, expects, does not expect, budget, scheduled, estimates, forecasts, anticipate or does not anticipate, believe, intend and similar expressions or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved, have been used to identify such forward-looking information. Although the forward-looking information contained in this AIF reflects management s current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be consistent with such forward-looking information. A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking information, including those listed in the Risk Factors section of this AIF. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of Teranga. These factors should be considered carefully and prospective or existing investors should not place undue reliance on any forward-looking information contained in them. Forward-looking information necessarily involves significant known and unknown risks, assumptions and uncertainties that may cause Teranga s actual results, performance, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking information. Although Teranga has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective or existing investors should not place undue reliance on such forward-looking information. The forward-looking information is stated as of the date of this AIF and, except as required under applicable laws, Teranga assumes no obligation to update or revise such information to reflect new events or circumstances. Forward-looking information and other information contained herein concerning, among other things, mineral exploration and management s general expectations concerning the mineral exploration industry are based on estimates prepared by management using data from publicly available industry sources as well as from market research and industry analysis as well as assumptions based on data and knowledge of the industry which management believes to be reasonable, including, among other things, the ability to obtain any requisite Senegalese and/or Burkinabe governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions and courses of action. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While management is not aware of any misstatements regarding any industry data presented herein, mineral exploration involves risks and uncertainties and industry data is subject to change based on various factors. In addition, please note that statements relating to reserves or resources are deemed to be forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably mined in the future. All of the forward-looking statements made in this AIF and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Teranga.

3 Table of Contents PRELIMINARY NOTES... 1 Date of Information... 1 Units of Measure... 1 Abbreviations... 1 Currency Conversion... 1 Technical Information... 1 INFORMATION INCORPORATED BY REFERENCE... 2 CORPORATE STRUCTURE... 2 Name, Address and Incorporation... 2 Intercorporate Relationships... 2 GENERAL DEVELOPMENT OF THE BUSINESS... 3 Three Year History... 3 NARRATIVE DESCRIPTION OF THE BUSINESS... 4 Overview... 4 Mission, Vision, Strategy... 4 Strengths and Competitive Advantages... 5 Liquidity and Capital Resources Outlook... 9 Acquisition of Gryphon Minerals Limited MATERIAL PROPERTIES Sabodala Technical Report Project Description and Location History Project Operating Summary Mining Rights Accessibility, Climate, Local Resources, Infrastructure and Physiography Project Infrastructure Mineral Processing Geology and Mineralization Exploration and Drilling Activities Sabodala Mining Concession Regional Land Package Sampling, Analysis and Data Verification Mineral Resources Mineral Reserves Environmental, Permitting and Social Considerations Sales of Gold and Contracts Emerging Market Disclosure RISK FACTORS Risks Related to our Business DIVIDENDS AND DISTRIBUTIONS DESCRIPTION OF CAPITAL STRUCTURE Common Shares Stock Option Plan

4 RSU and DSU Plan MARKET FOR SECURITIES Trading Price and Volume DIRECTORS AND OFFICERS Name, Address, Occupation and Security Holding Cease Trade Orders, Bankruptcies, Penalties or Sanctions Conflicts of Interest LEGAL PROCEEDINGS AND REGULATORY ACTIONS INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS AUDIT COMMITTEE OTHER STANDING COMMITTEES OF THE BOARD TRANSFER AGENT AND REGISTRAR MATERIAL CONTRACTS INTEREST OF EXPERTS ADDITIONAL INFORMATION NON-IFRS FINANCIAL MEASURES APPENDIX A - GLOSSARY OF MINING TERMS APPENDIX B - AUDIT COMMITTEE CHARTER 2

5 PRELIMINARY NOTES Date of Information In this AIF, unless the content otherwise requires, references to our, us, its, the Company or Teranga mean Teranga Gold Corporation and its subsidiaries. All the information contained in this AIF is as at December 31, 2016, the last day of the Company s recently completed financial year, unless otherwise indicated. Units of Measure The metric system is used throughout this AIF with the exception of gold quantities which are reported in troy ounces, in each case unless otherwise stated. Abbreviations Au g g/t km km 2 m mm Mtpa Mt MW oz ppb t the chemical symbol for gold gram grams per tonne kilometre square kilometre metre millimetre million tonnes per annum million tonnes mega watt troy ounce (31.1 grams) parts per billion tonne Currency Conversion In this AIF, references to $ or US$ are to United States dollars, CDN$ or C$ are to Canadian dollars, and AUS$ are to Australian dollars. The Company s financial statements are expressed in United States dollars. The noon rates of exchange on March 29, 2017, as reported by the Bank of Canada were as follows: US$ CDN$ AUS$ US$ $1.00 $0.75 $0.77 C$ $1.34 $1.00 $1.02 AU$ $1.31 $0.98 $1.00 Technical Information The disclosure in this AIF of a scientific or technical nature, including, among other things, disclosure of mineral reserves and resources regarding Teranga s mineral assets in Senegal, is based on the technical report entitled the Sabodala Project, Senegal, West Africa dated March 22, 2016 (the Sabodala Technical Report ) prepared by Teranga and Roscoe Postle Associates Inc. ( RPA Inc. ) prepared in accordance with National Instrument ( NI ) and other information that has been prepared by or under the supervision of qualified persons (as such term is defined in NI ) and included in this AIF with the consent of such persons. The Sabodala Technical Report has been filed on the System for Electronic Document Analysis and Retrieval ( SEDAR ) and may be accessed electronically at Actual recoveries of mineral products may differ from reported mineral reserves and resources due to inherent uncertainties in acceptable estimating techniques. In particular, inferred mineral resources have a significant amount of uncertainty as to their existence, economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category of resource. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Investors are cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into proven and probable reserve. For further information on any scientific or technical disclosure included in this AIF relating to Teranga s Senegalese mineral assets, please refer to the Sabodala Technical Report.

6 INFORMATION INCORPORATED BY REFERENCE The following documents are incorporated by reference into this AIF: Annual Audited Consolidated Financial Statements of the Company for the year ended December 31, 2016, together with the notes thereto (the Consolidated Financial Statements ); Management Discussion and Analysis for the year ended December 31, 2016 (the MD&A ); and Sabodala Technical Report prepared by Teranga and Roscoe Postle Associates Inc. dated March 22, The documents incorporated by reference are available for review on SEDAR at and on the Australian Stock Exchange website at All documents are filed under the Company s name. Name, Address and Incorporation CORPORATE STRUCTURE Teranga was incorporated on October 1, 2010 under the Business Corporations Act (Canada). Teranga s articles were subsequently amended on November 4, 2010 to, among other things, remove the private company transfer restrictions. Teranga s head and registered office is located at 121 King Street West, Suite 2600, Toronto, Ontario, M5H 3T9, Canada. Teranga s website is and its telephone number is (416) Intercorporate Relationships The following chart sets out the organizational structure of Teranga and each of its material subsidiaries, as well as the percentage of ownership and jurisdiction of incorporation or continuance of each such material subsidiary. TERANGA GOLD CORPORATION Teranga Gold (Ivory Coast) Corporation 100% CANADA 100% Teranga Gold (Australia) Pty Ltd. 100% 51% Gryphon Minerals Burkina Faso Pty Ltd Boss Minerals Pty Ltd (2) 100% 51% Gryphon Minerals West Africa Pty Ltd Askia Gold Pty Ltd. (3) 100% Teranga Gold (B.V.I.) Corporation AUSTRALIA B.V.I. 100% Loumana Holdings Ltd. 100% Sabodala Gold (Mauritius) Limited 90% Sabodala Gold Operations SA (4) 100% Sabodala Mining Company SARL MAURITIUS 90% 100% Societe Minere Gryphon SA (1) Boss Minerals Sarl 100% Gryphon Minerals Burkina Faso Sarl 100% Boss Gold Sarl SENEGAL BURKINA FASO 100% Teranga Exploration (Ivory Coast) SARL IVORY COAST (1) The remaining 10% is held by the Government of Burkina Faso. (2) The remaining 49% is held by the Boss Resources Ltd., the joint venture partner. (3) The remaining 49% is held by the Boss Resources Ltd., the joint venture partner. (4) The remaining 10% is held by the Government of Senegal. 2

7 GENERAL DEVELOPMENT OF THE BUSINESS Teranga is a Canadian-based gold mining company committed to responsible mining and sustainable development in the communities in which it operates. Teranga is listed on both the Toronto and Australian stock exchanges (TSX/ASX: TGZ), and is engaged in the production, development and exploration of gold in West Africa. Teranga s strategic vision is to become a multi-jurisdictional West African gold producer with a portfolio of assets offering diversified production with strong cash margins and sustainable free cash flows. Since its initial public offering in December 2010 (the IPO ), the Company has produced more than 1.2 million ounces of gold at its flagship Sabodala gold operations in Senegal, West Africa ( Sabodala or Sabodala Gold project ). As of December 31, 2015, the Sabodala Gold project contains 4.4 million ounces of Measured and Indicated Resources including 2.6 million ounces in reserves and a further 0.9 million ounces of Inferred Resources.1 Since the IPO, Teranga has increased its reserve base by over 2 million ounces after netting out more than 1.2 million ounces of production. Teranga has completed two significant acquisitions since its IPO, one in each of Senegal and Burkina Faso, as more fully described below. These acquisitions have allowed the Company to consolidate and significantly expand its mining rights in Senegal, and to procure a development project in Burkina Faso (the Banfora or Banfora Gold project ) along with two prospective exploration projects, all more fully described below. Today, Teranga operates in three West African jurisdictions, with exploration permits acquired in Ivory Coast in While very early stage, the Company believes these properties and potential future mining rights that may be acquired will provide a further pipeline of future growth opportunities. Three Year History In May of 2013, Teranga and its local operating subsidiaries entered into a series of agreements with the government of Senegal with the stated intent to resolve outstanding tax disputes and to provide a framework for the future growth of Teranga s investment in Senegal (the Global Agreement ). The expansion of Teranga s mineral license area from 33km 2 to its present 291.km 2 described below follows directly from the terms of this Global Agreement. On October 4, 2013, Teranga completed the acquisition of Oromin Explorations Ltd. ( Oromin ) which held a 43.5% participating interest in a joint venture, the Oromin Joint Venture Group ( OJVG ). The OJVG held a 90% interest, along with 10% held by the government of Senegal, in a 212.6km 2 mining concession contiguous with the mining license held by Teranga s principal Senegalese operating entity Sabodala Gold Operations SA ( SGO ). On January 15, 2014, Teranga completed a $135 million gold stream transaction with Franco-Nevada Corporation ( Franco Nevada ) to fund its acquisition of the balance of the OJVG that it did not already own, and retire half of the Company s then outstanding $60 million loan facility (the Gold Stream Transaction ). Pursuant to the Gold Stream Transaction, Franco Nevada purchased a fixed annual amount of gold in the amount of 22,500 oz from SGO for the first six years of the agreement, and thereafter a right to 6% of future gold production. With the acquisition of 100% of the OJVG, Teranga consolidated its interests in the Sabodala region and increased its mine license area from 33km 2 to 245.6km 2. Subsequent to its acquisition of the OJVG, Teranga executed a new mining convention with the government of Senegal in April 2015 (the Sabodala Mining Convention ) which further expanded the Sabodala mining license to km 2 with the inclusion of the Gora gold project, a satellite deposit covering a perimeter of 45.6km 2 (the Sabodala Mining Concession ). The Gora gold project was previously held under an exploration permit controlled by Teranga s Senegalese exploration entity, Sabodala Mining Company SARL ( SMC ) and subsequently included in the Sabodala Mining Concession under the provisions of the Global Agreement. On January 29, 2016, a Presidential Decree extended the term of the Sabodala Mining Concession to January 26, In October 2015, Teranga secured an investment and entered into a voting rights agreement (the Voting Agreement ) with Mr. David Mimran as part of a non-brokered CDN$22,736,000 private placement (the 2015 Private Placement ) which established Mr. Mimran as a cornerstone investor in Teranga with a 9.9% equity position. As part of this transaction, Mr. David Mimran was appointed to Teranga's board of directors (the "Board"). Through Tablo Corporation ( Tablo ), a Mimran family controlled investment company, Mr. Mimran has increased his equity position to 19.3%, demonstrating his continued support for Teranga s vision to become a West African based mid-tier gold producer. In connection with the 2015 Private Placement, Mr. Mimran has consistently exercised his pro-rata participation rights in subsequent equity issuances of the Company including those with respect to the Gryphon acquisition (described below) and the Company s concurrent private placement and public offering in November 2016 (also described below). A copy of the Voting Agreement was filed by Teranga and is available on SEDAR. In July of 2016, Teranga entered an exploration agreement with Miminvest SA ( Miminvest ) to identify and acquire gold exploration stage mining opportunities in Ivory Coast (the Exploration Agreement ). Miminvest is a company established to invest in gold and natural resources in West Africa and is controlled by the Mimran family and Mr. David 1 For full details on the Company s reserve and resource estimates, please refer to the Sabodala Technical Report and the applicable tables on pages of this AIF. 3

8 Mimran, a director of Teranga. Under the terms of the Exploration Agreement, Miminvest transferred 100 percent of its ownership interest in exploration properties comprising 1,838km 2 in Ivory Coast to Teranga (the Miminvest Permits ). In exchange, Miminvest retained a net smelter royalty interest of 3% and will provide ongoing in-country strategic advice to the Company. Teranga will continue to pursue additional exploration projects in Ivory Coast with Miminvest. On October 12, 2016, Teranga announced that it had completed the acquisition of Gryphon Minerals Limited ( Gryphon ). Gryphon s key asset, the Banfora gold project, is a fully permitted, high-grade open pit gold project located in Burkina Faso (the Banfora Gold project ). The Banfora Gold project remains a prospective, early stage development project. At present, the Banfora Gold project is not a material property for the Company and as such the Company does not have a technical report prepared in accordance with NI for the Banfora Gold project. On October 13, 2016, in connection with the Gryphon acquisition, Tablo exercised its pre-emptive participation rights and completed a non-brokered private placement of 9,671,625 common shares of the Company (the Common Shares ) at an issuance price of $ for gross proceeds of approximately CDN$10 million (the October 2016 Private Placement ). On November 21, 2016 Teranga completed a bought deal offering of 32,500,000 Common Shares at a price of CDN$1.05 per Share for gross proceeds of approximately CDN$34.1 million (the "Public Offering"). Concurrent with the closing of the Public Offering, the underwriters partially exercised their over-allotment option and purchased an additional 2,155,000 Common Shares at a price of CDN$1.05 per Common Share for gross proceeds of approximately $2.3 million. On the same day, 29,500,000 Common Shares were issued on a non-brokered private placement basis at the same price of CDN$1.05 per Common Share to Tablo, for gross proceeds of approximately CDN$31 million (the November 2016 Private Placement ). Net proceeds of the Public Offering and the November 2016 Private Placement were CDN$64.9 million ($48.4 million) after deduction of underwriter fees and expenses totaling approximately CDN$2.5 million ($1.8 million). During 2016, Teranga achieved its operational and corporate objectives. The Sabodala project delivered record production and unit costs, and successfully completed the commissioning of an additional crusher and screening station to further de-risk the Company s operations. At the same time, Teranga also completed a strategic transaction in Burkina Faso acquiring Gryphon with its Banfora Gold project, and two exploration projects, Golden Hill and Gourma. In addition, Teranga entered into an exploration agreement with Miminvest SA in the Ivory Coast; providing the Company with further potential diversification opportunities in the future in a third West African jurisdiction. In regards to 2017, Teranga is focused on achieving its production target of between 205,000 and 225,000 ounces of gold in Senegal while also concluding a feasibility study on its Banfora Gold project. Similarly, the Company is currently exploring large regional land packages across Senegal, Burkina Faso and Ivory Coast. Overview NARRATIVE DESCRIPTION OF THE BUSINESS Teranga is a multi-jurisdictional gold producer, developer and exploration company based in West Africa. Teranga s producing asset, the Sabodala Gold project is based in Senegal. Teranga is currently completing work on an updated feasibility study for its fully permitted Banfora Gold project, which is anticipated to be completed by mid-year Depending on the results of the feasibility study and an investment decision of the Board, the Banfora Gold project may move into construction and development in In addition, Teranga has committed to invest $12-$15 million in exploration activities over its most prospective properties in Senegal, Burkina Faso and in Ivory Coast. The majority of the exploration budget will be split between Senegal and Burkina Faso, which have the most advanced prospects to date. Teranga s significant investment in corporate social responsibility ( CSR ) initiatives has helped establish a mutually beneficial partnership with the regional and local levels of government in Senegal. This strengthening relationship is expected to continue and to generate significant positive spin-offs for the local and regional population in terms agriculture and food security, youth education and training, health care and long-term employment. In recognition of Teranga s outstanding commitment and lasting contributions to the communities surrounding its Sabodala Project, the Company received two notable CSR awards in 2016, in particular, the Canadian UN Sustainable Development Goals Award and the Prospectors & Developers Association of Canada (PDAC) Award for Environmental and Social Responsibility. Mission, Vision, Strategy Our mission is to create value for all of its stakeholders through responsible mining. Our vision is to become a multi-jurisdictional West African gold producer with a portfolio of assets offering diversified production with strong margins and sustainable free cash flows. 4

9 Our strategy is to maximize shareholder value by focusing on increasing long-term sustainable cash flows through diversification and scale. Our core strategic pillars include (i) optimization of our existing asset portfolio for growth; (ii) on-time and on-budget project development; (iii) targeted multi-jurisdictional exploration; and (iv) cost and balance sheet strength. i. Optimizing our existing asset portfolio for growth: Teranga has a seven (7) year track record of operations, project development and exploration in Senegal. We remain focused on leveraging our operating, development and community relations expertise to further expand our footprint within the mine license and regional land position. In Senegal there is considerable opportunity to increase reserves and resources with the resumption of drilling at Niakafiri (our most prospective Senegalese mine license target located three kilometers from the Sabodala mill) as well as a number of advanced exploration prospects and targets on the mine license and regional land package. As the owner of the only operating large-scale gold processing facility in Senegal we also continue to pursue local strategic opportunities to leverage our Sabodala mill in order to increase mill feed. The recent implementation of our mill optimization project, new grade control procedures, and build-up of high-grade inventory are expected to further de-risk and optimize the operation. Over the longer-term we will seek to opportunistically add to our prospect pipeline by seeking opportunities that leverage our existing gold footprint in Senegal, Burkina Faso, and Ivory Coast. All of our capital projects are evaluated using minimum after-tax internal rates of return to govern our capital allocation and investment decisions. ii. iii. iv. On-time and on-budget project development: We are focused on the completion of the feasibility study discussed above required to complete a NI technical report for the Banfora gold project by mid Subject to the results of the feasibility studies and a board investment decision, construction of the Banfora gold project is expected to leverage Teranga s extensive project development and operational skills developed at Sabodala, and to benefit from an experienced management team and technical consultants focused on delivery of project cost and timelines. Targeted multi-jurisdictional exploration: With the recent addition of the Burkina Faso and Ivory Coast prospective land positions, multi-jurisdictional exploration is a key priority of the company s diversification and scale strategy. With $12-$15 million earmarked for exploration, our multi-jurisdiction advanced exploration programs in Senegal, Burkina Faso, and the Ivory Coast are focused on increasing the likelihood of an exploration discovery on Teranga s West African gold properties. A multi-year exploration program is underway at Banfora with a comprehensive drilling program already completed for the Nogbele, Fourkoura, Samavogo and Stinger deposits. An additional 11 priority targets are being explored, of which, multiple targets are within trucking distance to the proposed Banfora mill. At the Golden Hill property on the prospective Hounde belt in Burkina Faso we have prioritized ten prospects for more advanced work in 2017 on the back of previously defined high quality prospects. In Ivory Coast, Guitry is an early stage discovery warranting a priority exploration program amongst the five greenfield exploration tenements totaling nearly 1,838 km 2. Cost and balance sheet strength: We are committed to the ongoing reduction of our cost profile through continued focus on productivity improvements in order to maximize Sabodala s sustainable free cash flow generation capacity, which, in combination with our existing strong cash balance is expected to strengthen Teranga s liquidity and optionality as it looks to fund its project development, exploration and future growth activities. Strengths and Competitive Advantages The Board believes that Teranga has the following strengths to assist with the execution of its growth strategy. Experienced Management Team Teranga has an experienced management team which benefits from the strong leadership and oversight of the Board, including Non-Executive Chairman, Alan Hill, a former senior executive with Barrick Gold Company ( Barrick ). During his 20 years at Barrick, Mr. Hill oversaw the evaluation, acquisition and development of many of Barrick s mines. Some of the senior management team at Teranga worked with Mr. Hill at Barrick, and more recently at Gabriel Resources Ltd. redesigning, for environmental permitting purposes, a large scale gold project in Europe. Richard Young is the President and Chief Executive Officer of Teranga, with 25 years experience working in the gold industry. A Chartered Professional Accountant, Mr. Young joined Barrick Gold Corporation in 1991 and served in a series of positions of increasing responsibility in finance, corporate development, mine development and investor relations. Prior to joining Teranga in 2010, Mr. Young served as Vice President and Chief Financial Officer of Gabriel Resources Ltd. for five years. Overall, Mr. Young has raised nearly $1 billion in debt and equity financing over his career. 5

10 Mr. Chawrun is the Chief Operating Officer of Teranga. Mr. Chawrun played a fundamental role in steering the Company's successful acquisition and integration of the OJVG property, the development of the high-grade Gora satellite deposit, and driving several high-return organic growth initiatives including a plant expansion and evaluation of heap leaching. More recently he has successfully completed a mill optimization project in Senegal that came in on time and under budget and materially improves our milling throughput by adding further crushing capacity. Mr. Chawrun is also overseeing the feasibility study associated with Teranga s Banfora Gold project. Prior to Teranga, Mr. Chawrun held a number of senior management, project development and operations positions at Detour Gold, Dynatec Mining, Suncor Energy and Fording Coal (now part of Teck Resources). Mr. Chawrun holds a B.Sc. Mining Engineering from Queen's University, a B.Sc. Geology from McMaster University, and an MBA from Athabasca University. Beyond Mr. Young and Mr. Chawrun, the balance of Teranga s senior management team are as follows: Mr. Navin Dyal, Chief Financial Officer; Ms. Sepanta Dorri, Vice President Corporate and Stakeholder Development; Mr. David Savarie, General Counsel & Corporate Secretary and Mr. David Mallo, Vice President Exploration. Several members of the senior management team, along with many of the technical experts who assist in the evaluation, acquisition, exploration, development and operations of the Company s properties have worked together for almost 10 years. The team has a proven track record of identification and acquisition of gold assets, as well as permitting and developing mines around the world. Experienced Development Team Our corporate and site based management teams have broad experience in development and capital projects in West Africa. The design, construction and commissioning of the Sabodala plant, including a subsequent mill expansion in 2012 and the installation of a parallel crushing circuit in 2016 provides invaluable experience to our Management team as it looks to develop a second operation in Burkina Faso. Subject to completion of ongoing feasibility studies including, amongst others, ongoing metallurgy test work and an investment and construction decision by the Board noted above. Management anticipates its potential Banfora Gold operations to be designed and built in substantially the same manner as Sabodala, leveraging our seven (7) years of operating knowledge in Senegal. Experienced and Strengthened Exploration Team In 2015, Mr. Mallo was appointed Vice President of Exploration, the first time the head of exploration was named as part of the executive management team at Teranga. This appointment recognized the track record and experience Mr. Mallo brings to Teranga, but also the new strategic approach being brought to Teranga s exploration program. Previously, Mr. Mallo was Manager of Advanced Projects at Prime Explorations Ltd., Mr. Mallo was an integral part of the acquisition, discovery, and exploration management team at the world-class Eskay Creek gold deposit in northern British Columbia. As Executive Vice President of Exploration for Adrian Resources Ltd., Mr. Mallo managed all aspects of the extensive exploration programs through feasibility at the world-class Petaquilla copper-gold property in Panama. More recently, Mr. Mallo was the Vice President of Exploration for Oromin Explorations Ltd. at the OJVG gold project in Senegal, West Africa. In this capacity, he was responsible for designing, implementing and managing all aspects of the advanced exploration campaigns from the 2004 inception of the OJVG gold project through feasibility and merger with Teranga in While managing the exploration programs for Oromin, the OJVG Gold Project progressed from a grassroots property to a viable multi-million-ounce gold property hosting numerous gold deposit discoveries, including Teranga's currently operating Masato and Golouma deposits. Mr. Mallo holds a Bachelor of Science (Specialist) degree from Brandon University and has over 35 years of mineral exploration experience predominantly in project evaluation and management of exploration programs. With the Gryphon acquisition, Teranga retained the services of all key members of Gryphon s highly accomplished exploration team, including Mr. Simon Bolster. Mr. Bolster, amongst others, will assist Teranga in implementing bulk leach extractable gold drainage (BLEG) surveys and other techniques across Teranga s exploration and mine license areas. These techniques were successfully deployed by Gryphon in Burkina Faso and Teranga believes they can provide significant value in identifying the most prospective areas across its extensive West African land package. Experienced Operating Team The operating team at the Sabodala gold mine is experienced and brings a broad base of African gold mining experience, with most senior positions occupied by professionals with more than 20 years of gold mining experience. Lessons learned at Sabodala will be applied to Banfora, further de-risking development, construction and future operations. Strong Corporate Social Responsibility Platform Through a focus on sustainable livelihoods Teranga s investment in CSR has helped to establish a win-win partnership with its local communities, and the regional and local levels of government. These partnerships have been the principal force towards the achievement of Teranga s local and regional development objectives, and its ability to develop a sustainable social license in the countries in which it seeks to gain a larger footprint. 6

11 Strong Regional Reputation The success of the Sabodala gold mine has given the Company a solid reputation in Senegal, and a sound basis for future development within the country. Balanced and Effective Board of Directors In the last four years, Teranga has added depth to its Board. In 2013 and 2014 respectively, Mr. Edward Goldenberg and Dr. Jendayi Frazer also joined the Board. Mr. Goldenberg, currently a senior partner at Bennett Jones LLP, is a Member of the Order of Canada and a former Chief of Staff to Former Canadian Prime Minister Jean Chretien. Dr. Jendayi Frazer is a former U.S. Assistant Secretary of State for Africa Affairs ( ) after having served as the first woman U.S. Ambassador to South Africa (2004). Each of these members joined Teranga s Board with tremendous credentials and brought needed experience in government relations, corporate social responsibility and African experience. In October 2015, Mr. David Mimram joined the Board. Mr. Mimram is the Chief Executive Officer of Grands Moulins d Abidjan and Grands Moulins de Dakar, one of the largest producers of flour and agri-food in West Africa. Mr. Mimran is also the head of Tablo, Miminvest SA, and Mimran Natural Resources, all established as investment vehicles into West Africa s natural resource sector by Mr. Mimran and the Mimran Group, a family conglomerate with a history of successful business operations in Africa and Europe. Mr. Mimran currently acts as Special Advisor to the government of the Republic of Ivory Coast where he has led negotiations with the International Monetary Fund, the World Bank, the European Union, and the Government of the Republic of France. In 2016, Mr. Biggar was nominated and subsequently elected to join the Board as an additional independent director with an extensive professional background in both public and private multi-jurisdictional companies. More specifically, Mr. Biggar brings valuable investment banking, capital markets and mining experience to the Board. Teranga believes the continuity of the five (5) directors who have been members of the Board since Teranga s initial public offering (Messrs. Hill, Lattanzi, Thomas, Wheatley and Young) remains a beneficial resource to the Company as it continues to work towards executing on its vision of expansion and consolidation in Senegal and West Africa through a prudent allocation of capital. Teranga values the need to retain institutional knowledge and expertise while fostering objectivity, innovation and creativity through diversity and renewal, and will accordingly strive to reflect a proportional balance in its Board composition over time. This includes having a proportional balance of directors with varying tenures as a means to foster Board renewal and refresh. Competitive Conditions The mineral exploration and mining business is competitive in all phases of exploration, development and production. In order for Teranga to execute on its mission, vision and strategy, it needs to have the right people in the right places. Teranga competes with all mining companies for highly qualified people. Beyond people, Teranga competes with other mining companies for capital and other resources, many of whom have larger operations. There can be no assurance that additional capital and other resources will be available to fund the growth of Teranga s business other than the free cash flows provided by its existing operations. As Teranga seeks to grow, it will compete with other mining companies in search for and the acquisition of mineral properties. As a result of this competition, the majority of which is against companies with greater financial resources, Teranga may be unable to acquire attractive properties in the future on terms that add value to its shareholders. Employees With the recent acquisition of Gryphon, Teranga, including its Senegalese and Burkinabe operating entities, has approximately 1,300 employees, including expatriates, Senegalese and Burkinabe nationals, and contract workers. Over 90% of Teranga s workforce in Senegal and Burkina Faso are held by nationals. Foreign Operations All of Teranga s active interests are currently located in Senegal, Burkina Faso and the Ivory Coast, all of which are located in West Africa and, as such, its activities are exposed to various levels of regulatory, economic and other risks and uncertainties associated with foreign operations. See Risk Factors. 7

12 Community and Social Programs Senegal a) Local Initiatives Teranga s CSR program continues to set the industry standard for socially responsible mining in Senegal, with strong emphasis on long-term economic and social development partnerships with the communities around its mine and across the country. In recognition of its success in effective partnerships with its communities, Teranga received a number of notable CSR awards in 2016 including the Canadian UN Sustainable Development Goals Award and the PDAC Environmental and Social Responsibility Award. These awards recognized the Company s Gora fund, in particular, for its innovation in the rollout of a community development framework to achieve a win-win partnership for Teranga and the impacted communities. In 2016 Teranga continued its Social Fund commitment to increase its footprint in the areas of impact mitigation and benefits sharing within its regional communities. The implementation of the 2016 community investment projects in partnership with the communes reached a 95% completion rate as at the end of the year investment projects included three new market gardens, installation of the first cattle vaccination park, a health post, and education-related installations within the region. One notable project relates to the refurbishment of 25km of Khossanto-Diakhaling community tracks leading to their full restoration. Planning sessions are expected to be held early 2017 to further determine the 2017 community investment plan. At Gora, a community fund management committee was created in partnership with local leaders from six villages to oversee the funding and execution of community programs. Created by Teranga, this project-specific fund was established to support alternative livelihoods, employment generation and other long-term benefits for the Gora communities, which previously relied on artisanal mining activity. In its first year, the fund supported the provision of a fully equipped tractor, several grain mills, a hotel and a market garden to the targeted communities. Teranga continued to execute on its regional Teranga Development Strategy in 2016 with the completion of the Kedougou Region decentralization development plans created in close collaboration with the government of Senegal. On the partnerships front, Teranga continued to sponsor SODEFITEX, the largest in-country textile producer, in its support of 500 cotton farmers as part of the large scale cotton textile industry White Gold for Life program launched by Teranga in partnership with the government and local companies. Teranga s partnership with the Fondation Paul Gérin Lajoie for the vocational training of 50 youths in Tambacounda and Kédougou regions was in its 2 nd year in 2016, with the first class scheduled to graduate in early On the local procurement front, Teranga s Kédougou regional procurement program focused on training and capacity building of 20 regional companies as well as the continued delivery of several SGO procurement contracts. b) Health and Safety The Company has a strong health and safety record. The intensive training and rigorous application of the Company s Operational Health and Safety ( OHS ) program has been pivotal to the successful yearly results. The operations as a whole recorded over 1,263 days and in excess of 12 million exposure hours since 2014 without a lost time injury ( LTI ) prior to its most recent LTI described below. The operations have continuously maintained a LTI frequency rate well below acknowledged industry benchmarking standards, concluding 2016 with a LTI frequency rate of 0.00 (down from 0.69 in 2013), which compares significantly better than 5.93 as per the mining profile of ANZSIC 2006, 2014/15 for metal ore mining. To date, there have been 12 lost time injuries at the Sabodala Project since the commencement of operations. All of the affected employees are fully recovered and have returned to work save for the LTI described below on March 17, The focus of the OHS program is placed on proactive, people-based safety management which uses a documented systematic approach to focus on hazard identification, task observation and pre-job risk assessment in association with reward and recognition to employees demonstrating positive safety behavior. An annual external OHS audit ensures continuous improvement supported by a vigorous internal auditing program allow for proactive actions to be identified and actioned timeously. The OHS focus will continue to concentrate on refining management of change and maturing risk management in accordance with ISO to progress the loss prevention program. On March 17, 2017 the Company regretfully announced the fatality of an employee at its Sabodala Gold operations. The employee was fatally injured while working in the process plant. Teranga continues to work with local regulatory authorities to determine the cause of the incident and also commenced its own internal investigation. The safety and well-being of Teranga employees is of paramount importance to the Company. The fatality is the first to occur at Sabodala since commencement of operations in

13 Burkina Faso Following the acquisition of Gryphon, Teranga retained global resettlement consultants replan Inc., which has since changed its name to ERM, in late 2016 in order to progress resettlement planning activities in conjunction with the resettlement of 430 households within the Banfora project area. Comprehensive community development planning and livelihood restoration activities are planned at Banfora in 2017 as part of the resettlement action plan. Community programs underway to-date in Banfora have been primarily comprised of training programs targeting more than 9,000 people in the focus areas of HIV & AIDS, malaria prevention, and nutrition. Consultations are also underway with the communities to develop further community investment programs, such as a micro-dam for irrigation, pilot projects for agricultures and other support. These programs are expected to be transitioned into the overall comprehensive community development plans once implemented. Liquidity and Capital Resources Outlook In June 2016, the Company completed an extension of its $30.0 million revolver facility with Société Générale (the Revolver Facility ). The Revolver Facility matures on September 30, 2019, with the available amount decreasing to $15.0 million on June 30, The Revolver Facility carries an interest rate of LIBOR plus 4.65 percent with any unused facility amounts subject to a commitment fee of 1.6 percent. The Revolver Facility is subject to covenants that require the Company to maintain a current ratio of not less than 1.10:1; total debt to EBITDA2 of not greater than 2:1; historic debt coverage ratio of greater than 2.5:1 and a tangible net worth of not less than $300 million. The Company has remained compliant with all of these financial covenants. Net proceeds of approximately CDN$75 million were raised through the October 2016 Private Placement and the concurrent November 2016 Private Placement and Public Offering. Proceeds of the Concurrent November 2016 Private Placement and Public Offering are being used for construction readiness activities at the Banfora Gold project, funding of exploration activities associated with the Banfora, Golden Hill, and Gourma gold projects in Burkina Faso and for general corporate purposes. Teranga s primary source of liquidity comes from the Company s cash balance of $95.2 million as at December 31, 2016, which includes the funds received from Tablo and the above described equity offerings. Additional sources of liquidity for the Company in 2017 are expected to come from Sabodala cash flows, $15.0 million in undrawn funds from the Revolving Facility and $10.3 million of value added tax (VAT) receivables and VAT certificates received as at December 31, The key factors impacting our financial position and the Company s liquidity include the following: the Company s ability to generate free cash flow from operating activities; expected sustaining and growth capital expenditure requirements; and the gold price. Our cash position is highly dependent on the key factors noted above, and we expect we will generate sufficient cash flow from operations combined with our Revolver Facility to fund our current and short-term initiatives. Using a $1,200 gold price, the Company expects to generate sustainable free cash flows from its Sabodala operations in The Banfora Gold project is currently in the early stages of pre-construction activities and has yet to generate any revenues. The Company is currently reviewing the feasibility of the Banfora Gold project and assessing various alternatives of financing construction for the project which may include debt or equity financing or a combination thereof. The Company s current cash balance and the cash flows from Sabodala, together with the receipt of a NI technical report for the Banfora Gold project, are expected to be key contributors to the development of the Banfora Gold project. Funding under any credit facility will be subject to customary conditions precedent for a financing of the type. Although the Company has been successful in the past in financing its activities, there is no certainty any project debt or equity offering will be successfully completed. 2 EBITDA is a Non-IFRS Measures, see Non-IFRS Measures on page 53 of this AIF for a definition of this term. 9

14 Acquisition of Gryphon Minerals Limited On October 12, 2016, Teranga completed the acquisition of Gryphon by way of a scheme arrangement (the Scheme ) under the Australian Corporations Act 2001 (Cth). Pursuant to the Scheme, shareholders of Gryphon received an aggregate of 70,638,853 Teranga Common Shares or chess depository interests (CDIs) listed on the ASX (based on their election) on the basis of Teranga common share or CDI for each Gryphon common share not already held by the Company. Banfora Gold Project, Burkina Faso The Banfora Gold project was initially comprised of six exploration permits covering a combined area of 1,093 km 2 which, in 2014, was supplemented by the issuance of an exploitation permit or mining license located in the south-west of Burkina Faso, West Africa. Burkina Faso is one of the largest gold producing regions in Africa and is located on some of the world s most prolific greenstone belts (accounting for 22% of West Africa s greenstone belt exposure). The country is already host to a number of producing mines and this is anticipated to increase given current levels of mineral the prospecting and government support for the mining industry. The collective name "Banfora", used for the overall project area, is taken from the name of a local town to the east of the permits. All six of the exploration permits are 100% held by Teranga through its 100% owned Burkinabe subsidiary, Gryphon Minerals Burkina Faso SARL ( GMBF ). The current exploration licenses cover an area over 900 km 2 and a mining license that covers 89 km 2 (the Banfora Mining License ). The Banfora Mining License is 90% owned (Burkina Faso government 10%) through Teranga s 100% owned subsidiary Société Minière Gryphon SA. The exploration permits, including the Banfora Mining License are located in a major gold district where large gold deposits are also located. The BGP is in a good location as it is easily accessible by road and is in close proximity to the regional town of Banfora and the major city of Bobo-Dioulasso. In addition, an existing hydro-power supply source and substation is located less than 100km to the south of the project site in the Ivory Coast, which can potentially be used to power future mining expansion and development. Of the six exploration permits included in the BGP, all but Nogbele Sud have recently completed the process of renewal. The proposed Banfora Gold project contemplates open pit mining of four gold deposits within the lease areas; the Nogbele, Fourkoura and Stinger Deposits that fall into the Nogbele tenement and the Samavogo Deposit that is included in the Dierisso tenement. A graduated royalty scheme exists in Burkina Faso under which gold spot prices lower or equal to $1,000 per ounce are subject to royalty fees of 3%, a 4% royalty rate applies for spot prices between $1,000 and $1,300 per ounce and a 5% royalty rate for spot prices greater than $1,300. Repatriated dividends are subject to a 6.25% withholding tax. In addition, pursuant to a joint venture agreement, dated April 19, 2006, between Gryphon Minerals West Africa Pty Ltd. and Sanembaore Sarl Pty Ltd. ( Sanembaore ), GMBF acquired a 100% interest in the BGP through an earn-in and the payment of cash, the issue of shares and the retention by Sanembaore of a 1% net smelter royalty ( NSR ). Gryphon publicly released its last feasibility study for the Banfora Gold project on the Australian Stock Exchange on August 4, Resource or reserve estimates compliant with the Canadian Institute of Mining, Metallurgy and Petroleum ( CIM ) Definition Standards or National Instrument Standards of Disclosure for Mineral Projects ( NI ) were not provided at that time. Teranga intends to update and optimize the historic feasibility studies 10

15 completed by Gryphon and issuing a NI compliant technical report on the Banfora Gold project which is expected to be issued by mid At present, the Banfora Gold project is not a material property for the Company and as such the Company does not have a technical report prepared in accordance with NI for the Banfora Gold project. Golden Hill Project, Burkina Faso The Golden Hill project consists of three exploration permits covering 468 km 2 located in the south west of Burkina Faso (the Golden Hill project ). The Golden Hill project is considered particularly prospective, as it is located within the highly mineralized Houndé Greenstone Belt. This belt hosts the majority of the high grade discovered gold ounces in Burkina Faso, including the recently discovered Siou deposit plus the high grade Yaramoko deposit. The belt also hosts the Mana Mine and the Houndé deposit. The Golden Hill project straddles the same stratigraphy and structures that host these high-grade deposits. The Golden Hill tenements are subject to a shareholder and earn-in agreement between Boss Resources Ltd ( Boss ), Gryphon and Boss Minerals Ltd. dated June 27, 2014 the material terms of which are as follows: Gryphon has earned 51% of tenements; Gryphon solely manages the joint venture and funds all exploration on the projects up to the completion of a bankable feasibility study ( BFS ) and decision to mine; Boss is to have a free carried interest until completion of a BFS and decision to mine; Upon delivery of the BFS, Gryphon s interest in the joint venture will increase to 70%; Gryphon has the right to acquire an additional 10% interest in both the Golden Hill and the Gourma Projects for AUD$2.5 million; and Upon completion of the BFS but prior to a decision to mine, Boss may elect to convert the remainder of its interest to a 1.5% NSR, otherwise Boss shall be free carried to a decision to mine and will then be required to contribute on a pro rata basis. Teranga s exploration activities at the Golden Hill project began in Gourma Project, Burkina Faso The Gourma project consists of six exploration permits covering 1,322 km 2 in eastern Burkina Faso (the Gourma project ). The Gourma project includes approximately 60 km of a gold-bearing crustal shear that has received very little modern exploration. The Gourma project is located within the Fada N Gourma Greenstone Belt, 250 km east of Ouagadougou and only 80 km south-southwest of Niger s largest gold deposit, the Samira Hill gold mine. The Gourma project consists of six contiguous permits (Diabatou, Tyara, Foutouri, Boutouanou, Tyabo and Kankandi) that cover a total area of approximately 1,300 km 2. It is accessible from the south, off the Fada N Gourma-Kantchari highway through a well-maintained gravel road, and from the west through a gravel road from the town of Gayeri. The Gourma tenements are subject to a shareholder and earn-in agreement dated June 27, 2014 between Boss, Gryphon and Askia Gold Pty Ltd, the material terms of which are as follows: Gryphon has earned 51% of tenements; Gryphon solely manages the joint venture and funds all exploration on the projects up to the completion of a BFS and decision to mine; Boss is to have a free carried interest until completion of a DFS and decision to mine; Upon delivery of a BFS, Gryphon s interest in the joint venture will increase to 70%;Gryphon has the right to acquire an additional 10% interest in both the Golden Hill and the Gourma projects for AUD$2.5 million; and Upon completion of the DFS but prior to a decision to mine, Boss may elect to convert the remainder of its interest to a 1.5% NSR otherwise Boss shall be free carried to a decision to mine and will then be required to contribute on a pro rata basis. 11

16 Teranga s exploration activities at the Gourma project are expected to begin in Summary of Banfora, Golden Hill and Gourma Exploration Permits Teranga indirectly currently holds six (6) exploration permits for Banfora, three (3) exploration permits for Golden Hill and six (6) exploration permits for Gourma, in each case, with various expiry dates ranging from December 2017 to December Teranga applies for renewals for its exploration permits from time to time in the ordinary course as appropriate. MATERIAL PROPERTIES For an explanation of certain technical terms used in this AIF, see Glossary of Mining Terms. The Sabodala Gold project, as further described below, includes a gold mining license area of 291.2km 2 within which a CIL processing plant and related infrastructure produces gold bars in a doré form. A regional exploration package is within trucking distance of the Sabodala process plant. Sabodala Technical Report Unless otherwise stated, the information that follows relating to the Sabodala Project (including the Gora project) is derived from, and in some instances is an extract from the Sabodala Technical Report. Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Unless otherwise set out herein, reference should be made to the full text of the Sabodala Technical Report which has been filed with certain Canadian securities regulatory authorities pursuant to NI Standards of Disclosure for Mineral Projects and is available for review under the Company s profile on SEDAR and may be accessed at or Teranga s profile page on the Australian Stock Exchange website at Project Description and Location The Sabodala Mining Concession is located approximately 650km east of the capital of Senegal, Dakar within the West African Birimian geological belt in Senegal, and about 90km from major gold mines in Mali. The Sabodala mill was the first and remains the only large-scale gold processing facility to come into operation in Senegal. With Teranga s 100% ownership of the OJVG its mining license now covers an area of 291.2km 2. The Company is currently exploring its regional land package which surrounds the Sabodala gold mine (the RLP or Regional Land Package ). Management believes there is a reasonable basis for new discoveries given the history of exploration success in the surrounding area. The regional and package is located on the same geographical gold belt that runs through Mali and Senegal where more than 50 million ounces of gold have been discovered, including three world-class discoveries (+5 million ounces) million ounces refers to identified ounces on the Birimian greenstone belt, which straddles the border of Senegal and Mali, West Africa, comprised of gold ounces historically mined in addition to gold ounces currently reported as Measured and Indicated Resources, as available on GFMS Thomson Reuters and the latest company reserve and resource statements as of March 23, Three world class discoveries refers to projects where current proven and probable reserves combined with historical production exceed five million ounces, such projects include: Sadiola (AngloGold/IamGold), Loulo (Randgold) and Gounkoto (Randgold). 12

17 SABODALA PROJECT Location of the Sabodala Gold project within Senegal History The Sabodala deposit was discovered by Bureau de Recherches Géologiques et Minières ( BRGM ) in Subsequently, from 1961 to 1998, BRGM, a Soviet-Senegal joint venture, a Société Minière de Sabodala / Page Mining Ltd. joint venture, and Eximcor-Afrique SA conducted exploration programs including geological mapping, geochemical sampling, metallurgical studies and limited exploitation. In 2004, the government of Senegal announced that the Sabodala area was available for international open tender. Encouraged by the new Mining Code and Mineral Deposits Limited s, an Australian based publicly traded mining company, ( MDL s ) established interest in Senegal, a competitive bid on the Sabodala Project was submitted by MDL on June 7, On October 25, 2004, the government of Senegal awarded the Sabodala Project to a consortium comprised of MDL (as to 70%) and private Senegalese interests (as to 30%). On August 16, 2005, MDL agreed to purchase the 30% minority interest in the Sabodala Project which it did not own to assume a 100% interest in the project for a total consideration of 9,000,000 ordinary shares in MDL issued at a price of AUD$0.73 per ordinary share plus $5 million payable over a period ending March 1, This 100% interest was subject to the requirement that MDL form an exploitation company, SGO in which its interest in the Sabodala Project would be transferred and in which the government of Senegal would hold a 10% free carried interest, as well as an option, which has since expired, for the government of Senegal or a national private sector person or registered company to purchase at market value a further 30% contributory interest in the Sabodala Project. The Sabodala Mining Convention in respect of the Sabodala Project was executed on March 23, 2005 and exploration drilling commenced on June 29, Subsequently, a supplementary deed to the Sabodala Mining Convention for the Sabodala Project was executed by MDL and the government of Senegal on January 23, On May 2, 2007, MDL received mining concession status for the Sabodala Project by decree of the president of Senegal. The decree included the following key provisions: Ten-year mine lease. Exemption from all property, company and value added taxes for a period of eight years. Exemption from import and export duties for a period of four years starting from the date production commenced (March 2009). 13

18 A royalty (termed a 'mining tax') equivalent to 3% of gold sales is payable to the Senegalese government. The government of Senegal retains a 10% free carried interest after project capital is recovered with interest. Construction and development of the Sabodala gold mine and plant occurred throughout 2008 with full commissioning occurring in early Open pit mining commenced in the Sabodala pit in 2009 and continued until June Additional open pit mining started at Masato in September 2014 and at Gora in July First gold was poured in March 2009, from that date until December 31, 2015, 1,254,968 oz of gold have been produced. On November 23, 2010, Teranga completed the acquisition of the Sabodala gold mine and the regional exploration package (the Regional Land Package or RLP ) by way of a restructuring and demerger from MDL and shortly thereafter completed its IPO. As noted previously, Teranga agreed to increase the royalty rate for its Sabodala Project and all satellite deposits incorporated therein to 5% as part of its Global Agreement signed with the government of Senegal in Further, in early 2016, the government of Senegal agreed to extend the tax exemption on value added tax until May 2, 2022 pursuant to a First Amendment dated February 18, 2016 to the Sabodala Mining Convention. The Sabodala Mining Concession (or license) is renewable for one or several periods of not more than 10 years each until the depletion of the deposit subject to the condition that Teranga has satisfied in all material respects its legal and regulatory obligations as set out in the Sabodala Mining Convention. The initial 10-year period would normally have expired on April 30, 2017, however the signing of the amended and restated Sabodala Mining Convention on April 7, 2015 with the government of Senegal extended the term to January The Sabodala Mining Concession will remain renewable for successive five year terms thereafter based on anticipated mine life and ongoing regulatory compliance. Project Operating Summary The Sabodala operations began production from its Sabodala open pit in March Subsequently, Masato, Gora and Golouma open pits were added to its production portfolio. A summary of the open pit production history is shown below. Open Pit Production History Unit Ore mined Kt 2,637 2,915 3,973 5,916 4,540 6,174 7,748 2,132 Waste mined Kt 9,144 13,199 21,818 22,961 30,238 23,148 23,883 33,512 Total mined Kt 11,781 16,114 25,791 28,877 34,778 29,321 31,631 35,644 Grade mined g/t Ounces mined oz 186, , , , , , , ,394 Tonnes milled Kt 1,806 2,285 2,444 2,439 3,152 3,622 3,421 4,025 Head grade g/t Recovery % Recovered gold oz 166, , , , , , , ,735 The mining method utilized is conventional truck and shovel open pit mining. A selective mining practice and stockpiling strategy at the Sabodala mine since start-up has released ore at a faster rate than milling capacity. This has resulted in a large build-up of low grade stockpiled ore on the run of mine (ROM) pad. The material is planned to be fed to the Sabodala processing plant throughout the life of mine (LOM) and at the end of mine life. The Sabodala processing plant was expanded in late 2012 to a design capacity of approximately 3.5 Mtpa (fresh ore) and 4.0 Mtpa with a mix of fresh and oxidized ore. A mill optimization project was completed in the third quarter of 2016 and is expected to increase throughput by more than 15% on an annualized basis for fresh ore based on existing ore hardness. The plant comprises facilities for crushing, grinding, CIL cyanidation, and tailings disposal. Gold recovery facilities include acid washing, carbon stripping and electro winning, followed by bullion smelting and carbon regeneration. The LOM is approximately 13 years, ending mid-year The total annual open pit material movement is approximately 40 Mt with an average processing rate of 4.3 Mtpa in the first five years of the LOM plan. The average gold production for the first five years is 207,000 oz. 14

19 The underground mine construction is planned for 2020, with ore production in Underground mining is expected to be by C&F mining method. C&F mining is simple, repetitive, and highly flexible for deposits with uncertain continuity and regularity. Two deposits are expected to be mined concurrently in order to meet the current mine life schedule. Kerekounda and Golouma South are expected to be mined first starting in Once they are exhausted, the Golouma West deposits are expected to be mined. The objective of scheduling the deposits to be mined in this sequence is to have continuous production from the underground with some lag in the schedule to allow infrastructure to be moved from the first set of deposits to the second set. Pending future exploration success and gold prices, optimization of the LOM may warrant a re-evaluation of the timing for underground mining. Reference is made to the Sabodala Technical Report for further information regarding the Company s LOM. Mining Rights Teranga s mining rights include both full exploitation rights pursuant to the Sabodala Mining Concession as well as exploration rights as permit holder or joint venture partner in three exploration permits all within trucking distances of the SGO mill in eastern Senegal. Land Tenure and Mining Rights There are three major levels of permitting required in Senegal to carry out mineral exploration and development. The first permit, an Exploration Permit (Permis de Recherche), allows exploration to be undertaken. The second, an Exploitation Permit (Permis d exploitation), allows mining of small-scale mining deposits. The third, a Mining Concession License (Concession Minière), allows the company to mine the property with significant tax incentives from the government. In each case, a Mining Convention or Mining Agreement is the initial agreement entered into between the investor and the government of Senegal. The amended and restated Sabodala Mining Convention sets out the legal, fiscal, administrative and specific corporate conditions under which the permit holder shall undertake its operations. The Senegalese mining code confers rights and obligations on mining permit holders for the occupation of land inside and outside the lease perimeter. The right of occupation entails the authorization to conduct exploitation works and related activities, including all infrastructure works and operations for mine development. Financial Commitments Pursuant to the amended and restated Sabodala Mining Convention, SGO is required to pay a gross production royalty to the government of Senegal; invest $1,225,000 per annum in social development programs within the region; contribute $350,000 per annum for training of officers of the Directorate of Mines and Geology and Ministry of Mines; and contribute $30,000 per annum for logistical support of the territorial administration of the region. In addition; (i) $250,000 is payable annually pursuant to a forestry protocol with the Senegalese Ministry of Environment for a period of five years ending in 2019; (ii) $1,850,000 for additional reserves payable in 2017; (iii) annually commitments for institutional support under exploration permits ($112,000 in 2016); and (iv) with the commencement of mining at the Gora pit in July 2015, $200,000 is payable annually for each production year up to a maximum of $1,000,000 for community projects located around the Gora deposit. Following the completion of the acquisition of the OJVG, the Company is also required to make initial payments totaling $10.0 million related to the waiver of the right for the government of Senegal to acquire an additional equity interest in the Senegalese subsidiary of OJVG. As of the date hereof, $7.7 million has already been contributed to the government of Senegal under this commitment. On May 2, 2015, the Company s eight-year tax holiday (granted to SGO under the initial Sabodala Mining Convention dated March 23, 2005) expired. From that date forward, the Company has been subject to a 25% income tax rate on mining profits as well as customs duties and value-added tax on certain expenditures. The 25% income tax rate and all other tax rates have remained in place since the execution of the initial Sabodala Mining Convention. On February 18, 2016, the government of Senegal and SGO signed the Sabodala Mining Convention which provides SGO with a six-year exemption (expiring on May 2, 2022) from value-added tax on goods and services purchased from local suppliers or suppliers based outside of Senegal. Gora Project The Gora deposit is the first satellite deposit added to the Sabodala Mining Concession and lies approximately 28km northeast of the Sabodala processing plant. Gora is situated within the Sounkounkou exploration permit, in which SMC holds an 80% interest in an earn-in joint venture. SMC s joint venture partner in the Sounkounkou exploration permit Axmin Inc. ( Axmin ) has elected to take a 1.5% net smelter royalty ( NSR ) on the Gora Project in exchange for its fully participatory 20% interest. As a result of the Sabodala Mining Convention, the perimeter of the Gora Project which 15

20 covers an area of 45.6km 2 was removed from the Sounkounkou exploration perimeter and included within the Sabodala Mining Concession in Gora has been in production since Accessibility, Climate, Local Resources, Infrastructure and Physiography Accessibility The Sabodala Project (including the Gora project) is located in southeast Senegal, approximately 650km eastsoutheast of the capital city of Dakar. Access to the Sabodala Project from Dakar is by sealed road, Highway N1, to the regional centre of Tambacounda and then via a good all-weather sealed road, Highway N7, 230km southeast to Kédougou, then 96km of sealed and laterite-surfaced roads which access the villages of Faloumbo and Sabodala. A 1,250m sealed, public airstrip, capable of handling light to medium sized aircraft, lies at the north end of the mining concession. There are three villages on the Sabodala Mining Concession. Sabodala village is approximately 2km south of the Sabodala mine pit and is very close to the Niakafiri deposit. Faloumbo village is to the north-northeast of the Sabodala mine pit. The Dinkokhono village is occupied by just a few families formerly from Faloumbo. On the Golouma perimeter, there are six small villages, Bransan, Dendifa, Mankana, Bambaraya and Maki Medina. Climate In the region of Kedougou where the Sabodala Project is located, the highest monthly average temperatures are between March and May, 31 o C to 40 o C. The lowest monthly average minimum temperatures are between December and January, 17 o C to 26 o C. The annual Harmattan is a dry wind which blows from the north, usually from December to February, resulting in dusty and hazy skies. There is a distinct tropical wet season from June to October, with the most rain falling from storms between August and September, and a dry season from December to April. Mean annual rainfall within the Sabodala area is estimated to be 1,130 mm. It is possible to operate in Senegal on a year-round basis, but the processing schedule allows for a reduced mining rate and for predominantly fresh ore to be processed during the height of the wet season, mainly the third quarter. Local Resources, Personnel and Infrastructure The main mining camp is located approximately 3km from the mine and 2km from the plant and is designed to house up to 960 employees. A separate camp has been constructed at Bransan for exploration personnel and is designed to accommodate 50 persons. Teranga provides for the majority of its own infrastructure needs. Power is generated at the site using low speed, heavy fuel oil generators. A 30MW 5-unit engine heavy fuel oil power plant was originally constructed, and subsequently expanded to 36MW with the mill expansion by SGO in Water supply to service the processing plant and mine comprises three surface water storage dams from local catchment areas. These dams are designed to store adequate 16

21 water from seasonal rainfall events to provide for all production needs on a year-round basis. For emergency purposes, the site has a water pipe, including water access rights, to pump water from the Faleme River, if required. There are sufficient waste disposal areas and tailings storage areas. The Company constructed a plant and supporting facilities at the site including offices, shops and warehouses. Existing port facilities at Dakar are utilized for unloading of all equipment, spares and consumables for the mine. A significant proportion of the personnel involved in the mining operations have been sourced from the local villages, surrounding regions and Dakar. Physiography Topography in the area covering the Sabodala Gold project is generally undulating with a gentle gradient to the north and west towards the major river courses in the area. The elevation varies from approximately 150m to 350m above sea level. In the east of the area and abutting onto the eastern side of the concession is a north-south aligned ridge rising at least 100m above the surroundings. Vegetation ranges from savannah to thick bushes and large trees on hillsides. Watercourses are marked by palms. After each wet season villagers burn off a majority of the tall grass. Project Infrastructure The Sabodala Mining Concession infrastructure includes several open pits, a processing plant, a ROM pad, and a tailings storage facility ( TSF ) as shown in the figure below. The Sabodala operations currently operate with one TSF, however, a second tailings storage facility ( TSF2 ) has been designed and permitted for future construction when and as needed. The storage volume of the TSF is 12.4 Mm 3 for variable beach slope model and 18.0 Mm 3 for fixed beach slope model based on the crest level of the existing embankments, raising of the existing southern embankment and constructing new southwestern embankment. Teranga is expected to implement the fixed beach slope model for the TSF. Teranga is currently constructing a raise on the TSF embankment and is expected to complete this in the second quarter of At an average in-situ dry density for the deposited tailings of 1.49 t/m 3, this additional storage equates to approximately 26.8 Mt or 6.7 years of operation (4 Mtpa) with fixed beaches. Assuming the current TSF can continue to be operated to achieve an average in-situ dry density for the deposited tailings of 1.49 t/m 3, it could continue to operate through to the end of Q Construction of TSF2 could therefore be deferred until the end of the wet season 2021, effectively Q4 of 2021, and TSF2 could be commissioned in Q Prior to this management will evaluate the potential to raise TSF further or initiate construction for the TSF2 design. An additional raise to the TSF is available beyond the current design to 149RL (an elevation point above sea level), providing for significantly more storage space than is required for the current 13 year LOM. This could be completed at a relatively low capital cost since the existing western embankment for TSF forms part of the containment for the future TSF2 design. For further details on the Company s project infrastructure, please refer to Chapter 18 of the Sabodala Technical Report. A network of haul roads connect the various pits to the process plant. The Gora haul road is approximately 26km long and the Golouma haul road is approximately 7.5km long. Power is supplied from the power plant located near the Sabodala pit and processing plant, and diesel generators at the Golouma and Gora projects. Existing port facilities at Dakar are used for delivery of all project construction materials and long term operational freight. Teranga has set up its own corporate offices in Dakar in which logistics, government liaison, personnel transport, and other management functions for SGO and SMC are based. 17

22 Sabodala Infrastructure Map Mineral Processing The Sabodala processing plant was expanded in late 2012 to a design capacity of approximately 3.5 Mtpa (fresh ore) and 4.0 Mtpa with a mix of fresh and oxidized ore. Subsequent mil optimization work in 2015 and 2016, described further below, have increased throughput by more than 15% on an annualized basis. The plant comprises facilities for crushing, grinding, CIL cyanidation, and tailings disposal. Gold recovery facilities include acid washing, carbon stripping and electro winning, followed by bullion smelting and carbon regeneration. The major equipment of the plant includes: Primary crushers (x2) Metso C140S single toggle jaw crusher Secondary crusher: Sandvik CH660 cone crusher Semi-autogenous grinding (SAG) mill: Outotec 7.3m x 4.3m EGL, 4,000 kw Ball mills (x2): Outotec 5.5m x 7.85m EGL 4,000 kw Recycle (Pebble) crusher: Metso HP200SX Cone crusher CIL circuit: Three 2,600m 3 leach tanks and nine 1,240m 3 adsorption tanks with compressed air injection Elution circuit: 5 t batch capacity, split AARL elution Tailings thickener (x2): Outotec 23m high rate thickener A mill optimization project was launched in mid-2015 and completed in the third quarter of 2016; it consisted of adding a second primary jaw crusher and screening station to operate in parallel with the existing crusher. This increased availability to the live storage for the mill circuit, and provided the flexibility to reduce the top size primary crusher product. Additional components of the mill optimization project were upgrades to the SAG mill that included a trommel screen installation, redesign of the liner configuration and installation of a vortex discharge head. Upgrades to the ball mill circuit included increasing the ball mill charge and increased motor power for each ball mill, cooling systems and installation of new gearboxes. Upon completion and commissioning of the second crusher during the third quarter of 2016, the mill optimization project increased throughput by more than 15% on an annualized basis. More specifically, the milling rate for hard fresh rock is expected to be approximately 500 tph and between 520 to 580 tph for soft oxide material. 18

23 For further details on the Company s mining method and mineral processing activities, results and programs, please refer to Chapters 13 and 16 of the Sabodala Technical Report. Geology and Mineralization The Sabodala Mining Concession and the surrounding exploration permits are located in the 2,213 Ma to 2,198 Ma age Kedougou-Kenieba Inlier which lies within the Paleoproterozoic age Birimian Terrane of the West African Craton. The permits straddle two major divisions of the Kedougou-Kenieba Inlier the volcanic-dominated Mako Supergroup to the west, and the sediment-dominated Diale-Dalema Supergroup to the east. The Sabodala, Masato, Golouma South, Golouma West, Kerekounda and Gora deposits and western portions of the company's Regional and Near Mine projects are hosted in the Mako belt volcanics. The Mako Supergroup consists mainly of tholeiitic basalts and andesitic lavas (massive and pillowed flows) with minor komatiitic units interbedded with volcanoclastic sediments (pyroclastic, banded tuffs and agglomerates), quartzite and chert as well as ultramafics, dolerites and gabbros. The Diale and Dalema Supergroup are characterized by folded sandstones and siltstones interbedded with calc-alkaline ash and lapilli tuffs that are more pelitic and siliceous in the Diale Supergroup and more calcareous in the Dalema Supergroup. The Mako and Diale-Dalema supracrustal sequences are intruded by a series of variably deformed granitoid intrusions that range in age from 2,160 Ma to 2,000 Ma. These include the Karkadian Batholith, which bounds the Mako Belt to the west, and several major large stocks in the central Mako Belt in the project areas. Northeast trending intermediate to felsic and later, post-tectonic mafic dykes are present throughout the region, the latter forming prominent linear magnetic features. Felsic and intermediate composition dykes are often spatially associated with shear zones hosting gold mineralization, and locally are host to significant gold mineralization themselves. Principal structures on the Sabodala property form a steeply west-northwest dipping, north-northeast trending shear zone network previously referred to as the Sabodala Shear Zone. This includes the Niakafiri, and Masato shear zones, which are high strain zones developed in altered mafic and ultramafic units. There are also shear zones that are linked to them by north to northwest trending splays. These include the Ayoub s Thrust, which is focused along the ultramafic sill that lies on the west side (hanging wall) of the Sabodala deposit. Mineralization is generally associated with highly strained steeply dipping north-northeast or east-west trending shear zones, quartz carbonate-sericite-tourmaline-pyrite shear veins, highly altered quartz-carbonate-albite-pyrite zones, and often spatially associated with felsic and mafic dykes. For further details on the Company s geology and mineralization activities, please refer to Chapter 7 of the Sabodala Technical Report. Exploration and Drilling Activities In 2017, the Company s exploration program is expected to be focused on organic growth through: (i) the conversion of resources to reserves: (ii) extensions of existing deposits and targets along strike on the Sabodala Mining Concession of 291.2km² and the RLP, as well as (iii) a systematic regional exploration program designed to identify high grade satellite and standalone deposits. Sabodala Mining Concession Teranga has adopted a three-phase exploration approach for the Sabodala Project. Phase 1 includes target generation and consists of airborne geophysics, surface geochemistry, geological mapping, and rotary air blast ( RAB ) drilling and trenching. The Phase 1 work has largely been completed and the majority of Teranga s future exploration programs will be focused on Phase 2 and Phase 3. Phase 2 and Phase 3 have the objective of increasing Mineral Resources and Mineral Reserves within the entirety of the Sabodala Project. Phase 2, prioritizing and ranking, includes identifying targets and ordering them depending on their potential of hosting economic mineralization and Phase 3, target testing, includes trenching and reverse circulation and diamond drilling within the areas of significant mineralization. During the period 2014 to 2015, exploration focused on 19 targets on the Sabodala Mining Concession. On the Sabodala Mining Concession, trenching programs were undertaken on Golouma West Extension, Masato Northeast, Maki Medina East and started at the Goumbati East, and Goumbati West prospects. At the Masato Northeast prospect, a total of 24 trenches were completed. Detailed trench mapping and sampling successfully confirmed the interpreted northeast trend and extents of the shear zone, however, samples returned inconsistent gold values. 19

24 At Maki Medina East, 2,500 m of trenching were excavated to test soil anomalies across a 640 m north-south strike orientation. Results identified a number of targets for additional follow-up evaluation. In addition, trenching undertaken to investigate a 300m long soil anomaly to the south of Maki Medina Main indicates that gold mineralization extends to the south beyond previous drilling. For further details on the Company s pre-2016 exploration activities, please refer to Chapter 9 of the Sabodala Technical Report. From 2005 to April 2013, Teranga and its predecessors drilled approximately 4,606 diamond and RC drill holes totaling 879,125 m on the Sabodala Mining Concession and drilled approximately 11,597 diamond, RC and RAB drill holes totaling 287,267 m on the Regional Exploration Permits. Diamond drilling programs at Maki Medina, Niakafiri Southwest, Golouma South, Golouma Northwest, Kerekounda and Soukhoto deposits on the Sabodala Mining Concession from May 2013 to 2015 were completed to confirm the existing interpretation and grade of the mineralization domains, upgrade resource classification of Inferred Resource blocks, twin previously drilled holes, delineate high grade zones, and collect geotechnical data for testing. In addition, a gridded RC drill program was completed at Masato to determine the optimal spacing of RC holes for the mine operations grade control program, and a RAB sterilization program was undertaken to test the areas where new infrastructure was planned for upcoming mining activities. Diamond drill results successfully confirmed geological and grade continuity, and geological interpretation of mineralized zones between widely spaced drill holes. From May 2013 to end of 2015, Teranga completed 1,131 diamond, RC and RAB holes totaling 37,621 m on the Sabodala Mining Concession. During this same time, 45 diamond drill holes totaling 7,320 m were completed at the Marougou, Soreto, KA and KD prospects on the Regional Exploration Permits. Drilling on the regional exploration permits at the Marougou, Soreto, KA and KD prospects was planned to test extents and nature of identified shear zones, twin previously drilled holes, confirm the orientation and continuity of gold mineralization intersected in previous drilling programs, delineate thickness and depth of gold mineralized zones. Results returned some significant intercepts that require follow-up analysis and additional work. For further details on the Company s pre-2016 drilling activities, results and programs please refer to Chapter 10 of the Sabodala Technical Report. During 2016, exploration within the Sabodala Mining Concession occurred at six (6) prospects. Exploration activities included trenching, RAB drilling, RC drilling and core drilling. The majority of the 2016 exploration efforts were directed at the Goumbati West prospect were 17 trenches comprising 1,692 m were excavated, 181 RAB holes (5,430 m), 1 RC hole (155 m), 5 combined RC-core holes (571 m) and 185 core holes (17,724 m) were completed. The culmination of these exploration activities was the completion of an initial resource estimation in October This produced an estimated indicated resource figure of 568,000 t grading 1.69 g/t Au representing 31,000 gold oz and an inferred resource of 178,000 t grading 1.19 g/t Au representing 7,000 gold oz. The Goumbati West resource estimation is outlined in the table at the end of this section. Much of the total 2016 core drilling at Goumbati West was undertaken after the initial resource estimation. Goumbati West is scheduled for a resource estimation update in mid 2017 which is expected to include these additional drill hole results. A second area of exploration focus in 2016 was the Golouma area, specifically Golouma North. In total, 5 trenches (654 m), 56 RAB (1,546 m) and 42 core holes (5,014 m) were completed at Golouma. An initial resource estimation was completed for the Golouma North portion of the Golouma area in October 2016, from which an indicated resource of 170,000 t grading 1.32 g/t Au and an inferred resource of 295,000 t grading 1.42 g/t Au representing 14,000 gold oz was estimated. The Golouma North resource estimation is outlined in the table at the end of this section. Other activities within the Sabodala Mining Concession included the drilling of 8 core holes (1,200 m) at the Maleko prospect, and 10 (841 m) core holes at the Niakafiri deposit. Results from the drilling at Maleko provided enough encouragement to justify additional follow-up trenching and drilling evaluation. Drilling late in 2016 at the Niakafiri is a small component of a much larger core drilling program to be undertaken at Naikafiri with the goal of upgrading the mineral classification categories and expanding the mineralization where applicable both to depth and along trend. A limited trenching program was completed at the Koulouqwinde prospect (7 trenches, 1,439 m) and the Kinemba prospect (4 trenches, 245 m). 20

25 Resource Estimate as of October 31, 2016 Deposit Indicated Resources Inferred Resources Tonnes Grade Au oz Tonnes Grade Au oz ('000s) (g/t Au) ('000s) ('000s) (g/t Au) ('000s) Golouma North Goumbati West Marougou , Total , Notes for Mineral resources: 1. CIM definitions were followed for mineral resources. 2. Open pit oxide mineral resources are estimated at a cut-off grade of 0.35 g/t Au. 3. Open pit transition and fresh rock mineral resources are estimated at a cut-off grade of 0.40 g/t Au. 4. High grade assays were capped at grades ranging from 5.0 g/t Au to 13.5 g/t Au. 5. Open pit shells were used to constrain open pit resources. 6. Mineral resources are estimated using a gold price of US$1,450 per oz. 7. Sum of individual amounts may not equal due to rounding 8. Effective date is October 2016 Regional Land Package (RLP) The RLP is grouped into the following four different project areas: Near Mine Project, which contains the three permits of Bransan, Bransan South and Sabodala West; Faleme, which contains the two permits of Heremakono and Sounkounkou; Dembala, which contains the two (2) permits of Dembala Berola and Saiensoutou; Massakounda, which contains only one permit of the same name. Of the eight exploration permits that comprised Teranga s RLP, five are or were held solely by SMC, a wholly owned indirect subsidiary of Teranga, and three (3) are held by joint venture partners with SMC holding a majority interest in each permit. During 2016 five of the eight exploration permits expired, two others are set to expire during 2017 and a final permit will remain valid until Working with the Senegalese Ministry of Mines during 2016, Teranga filed applications for reissuance for new exploration permits that would comprise approximately 2/3 of the existing RLP pursuant to new exploration permits under the terms of Senegal s 2016 Mining Code. Upon issuance of the regulations for this current Mining Code, Teranga anticipates receipts of these new exploration permits. Please see the table below for detail on the permits comprising RLP. SMC Exploration Permits Original Permit Grant Date Current Permit Status Near Mine Project: Sabodala West November 2010 Expired November 2016 Application for re-issuance filed Bransan October 2006 Expired May Application for re-issuance filed. Bransan South November 2010 Expired November 2016 Application for re-issuance filed. Faleme Project: Sounkounkou September 2006 Expiring October 2017 Heremakono October 2005 Expired October 2016 Application for re-issuance filed. Dembala Project: Massakounda January 2005 Expiring January, 2017 Dembala Berola January 2005 Expiring January, 2017 Saiansoutou November 2010 Expiring November

26 All exploration permits are granted by ministerial decree and are subject to a mining convention signed between SMC and the government of Senegal. The gold exploration permits are held in a combination of full SMC ownership and earn-in joint ventures where SMC is the funding and managing party as outlined in below. Equity and Funding Arrangements for Permits Project Near Mine Faleme Permit SMC Equity (%) Holder Comments Bransan 70 SMC Partnership with local syndicate Bransan South 100 SMC 100% SMC Sabodala West 100 SMC 100% SMC Sounkounkou 100 Axmin 1.5% NSR over identified prospects Heremakono 100 Axmin 1.5% NSR over identified prospects Dembala Berola 100 SMC 100% SMC Dembala Saiensoutou 100 SMC 100% SMC Massakounda Massakounda Permit 100 SMC 100% SMC Given the Sabodala Mining Convention signed with the government of Senegal on April 7, 2015 and its provisions extending to SMC exploration permits, it is anticipated that permits that move into production will be merged into this mining convention and be bound by its revised fiscal terms regarding royalty rate and tax exoneration periods. Summary of Joint-Venture Agreements in Place over SMC's Exploration Permits There are currently two joint venture agreements over SMC s exploration permits: Axmin Joint Venture over the permits of Heremakono and Sounkounkou. Bransan Agreement although this permit is fully held by SMC, there is a 30% ownership right assigned to a Senegalese company, Senegal Nominees Limited. Axmin Joint-Venture Agreement The joint venture agreement with Axmin was amended and restated in January The renegotiated Axmin Joint Venture Agreement (the Amended and Restated Axmin JV ) reflects the following: the joint venture s interest in the permits is broken into Target Areas and the Manager (SMC) will specify the exploration work and budget proposed for each Target Area allowing Aximin to elect which Target Areas to maintain its 20% Participation Interest (as defined in the Amended and Restated Axmin JV) by funding twenty percent (20%) of all exploration costs, or to convert such equity interest into a 1.5% net smelter royalty (the NSR or Royalty ) from any future production from such Target Area; and As of the date hereof, Axmin has elected the 1.5% NSR on all identified Target Areas across both exploration permits. Bransan Joint-Venture Agreement The Bransan joint venture agreement was signed on July 4, 2007 and provides SMC with an initial ownership interest of 70%, with the remaining 30% held by Senegal nominees. SMC will however be responsible for 100% funding of the exploration work and will also be the manager. According to the agreement, once a discovery is made and a development decision is made, the Senegalese nominees have the right after 120 days to either: (i) convert to a contributing interest, in which case the Senegalese nominees will have to fund their share of the development costs; or (ii) not convert to a contributing interest, in which case Senegalese nominees will dilute to a 10% equity holding in the mine development with SMC s shareholding increasing to 90%. The Senegalese nominees will only be entitled to receive their benefits from production after Teranga has recovered all its joint venture and development costs. The start of the mining process will require the formation of a special purpose company, which will allow Senegal to take its 10% equity stake, and equity ratios will be diluted proportionally to accommodate Senegal s equity as follows: in the case where the Senegalese nominees have become a contributing party and maintained their original holding, SMC will hold a 63% interest and the Senegalese nominees will hold a 27% interest; or, in the case where the Senegalese nominees have diluted their original holding, SMC will hold a 81% interest and the Senegalese nominees will hold a 9% interest. Exploration Activities Through 2016, exploration activity was undertaken at 18 prospects within the RLP. Exploration activities included soil sampling, trenching, RC drilling and core drilling to varying degrees at the many prospects distributed across four exploration permits, Heremakono, Soukounko, Dembala Berola and Bransan. Throughout the Regional Exploration 22

27 land package, 6,822 soil samples were collected, 136 trenches comprising 20,928 m were excavated, 137 RC drill holes totaling 3,349 m were drilled and 54 core holes totalling 4,128 m were completed. Within the Heremakono permit, soil sampling and trenching programs were undertaken at Soreto, Nienienko Regional and Nienienko Main, as follow-up to the anomalous gold results previously returned at all of these prospect areas. At Soreto, trenching in 2015 tested termite and soil anomalies associated with the interpreted structural and mineralization extension further to the northeast of previous drilling. Trenching at Nienienko identified a 500-metre-wide zone with gold mineralization occurring in flat-lying, near surface quartz veins and felsic breccia units occurring over a strike length of 1,500 m (Nienienko Main). In addition, a detailed soil sampling program had identified anomalous gold values coinciding with shear zones following the north-northeast regional scale structural trend beyond the trenched area. Rock chip samples collected from several of the shear zones returned elevated gold values. The shear zones are 10 m to 20 m in width and characterized by quartz veining and gossan development associated with quartz-carbonate alteration. Trenching was completed at three parts of the Soreto prospect where nine trenches (1,284 m) were excavated. Results indicate that gold mineralization is isolated within very narrow, non-continuous quartz veins. Trenching was also undertaken at Nienienko (1 trench, 140 m), Kodadian (3 trenches, 276 m) and at the Leoba prospect were 19 trenches totaling 2,799 m were excavated. Drilling was also undertaken at Kodadian (3 core holes, 383 m), Leoba (3 core holes, 485 m) and Neinienko (137 RC holes, 3,349 m). Drilling results at Kodadian were very low with no further exploration work currently planned. At Leoba, two of the three holes intersected anomalous gold mineralization with over 2m to 4m width, while the other core holes drilled in the area successfully intersected a gold interval worthy of future follow-up exploration. The extensive RC drill program directed at Neineinko was testing flatlying quartz veining and felsic intrusives that provide a positive gold-in-soil geochem anomaly and a number of favorable trench results. A series of profile lines of short RC drill holes crossed the majority of the geochem footprint at Neinienko and although a number of the holes intersected gold mineralization of interest, it was generally very narrow and occurred within isolated pods. Further interpretation and evaluation of the Neinienko data is expected to be undertaken. At the Sounkounko permit, soil sampling, trenching and core drilling were completed at a variety of prospects. A total of 6,822 soil samples were collected on five separate grid areas from which a number of trenching targets were identified and gold-in-soil anomalies identified aided greatly in the understanding of mineralization orientations. The Doughnut Prospects, which include Diegoun North and South, Honey, Jam, Cinnamon and Cinnamon West, were reevaluated and results re-interpreted. Trenching undertaken at the KA prospect identified a flat lying gold mineralized zone at the contact between a quartz-feldspar porphyry intrusive and siltstone-shale unit. A trenching program undertaken at the KD prospect confirmed gold mineralization associated with narrow parallel quartz veins developed within sheared and sometimes brecciated metasediments. Throughout the Sounkounko permit area, 59 trenches were completed with the larger percentages located at Honey (21 trenches, 4,679 m), Jam (10 trenches, 1,326 m) and KB (10 trenches, 1,086 m). Successful trenching results, especially at the Honey and Jam trenches, led to follow-up core drilling in In total, at Sounkounko, 15 core holes comprising 1,815 m were completed with the most at Honey (5 holes, 1,085 m). Favorable drill results at both Honey and Jam are expected to be followed-up with additional trenching and drilling. Favorable trenching at the KB prospect is expected to result in additional trenching evaluation in advance of detailed drilling evaluation. Soil sampling was undertaken on the KC prospect with trenching programs on KA, KD, and Diabougou. On the Dembala Berola permit, exploration activities included trenching and core drilling. The primary exploration prospect within Dembala Berola is Marougou Main where 23 trenches totalling 2,646 m were excavated and 30 core holes totaling 869 m were drilled. Successful trenching and core drilling results at Marrougou Main have culminated in an initial resource estimation completed in October This estimation resulted in an inferred resource of 1,199,000 t grading 1.41 g/t Au representing 54,000 gold oz. The Maragou Main resource estimation is outlined within the table included on page 21. Exploration continued with both additional trenching and core drilling late in 2016, with further evaluation planned in Two other proximal prospects, Marougou West and Marougou South were trenched during the 2016 exploration campaign with mixed results. A follow-up work program is proposed for the Marougou South prospect, however, no further exploration is anticipated at the Marougou West target. The other area within the Dembala Berola permit receiving exploration attention in 2016 was the Cinnamon West prospect where 14 trenches (2,572 m) and 3 core holes (576 m) were completed. Results at Cinnamon West warrant additional trenching evaluation and possibly further drilling activity. Exploration activity at the Bransan Permit was limited to soil sampling on three large grid areas. In total, 4,908 soil samples were collected for which analysis had not yet been undertaken at the end of Sampling, Analysis and Data Verification Teranga has established standard operating procedures for sample preparation, analyses, and security, which are appropriate for gold mineralization and which follow industry standards. These procedures remain in place. Teranga s exploration geologists are responsible for all sampling activities conducted by geological technicians and samplers, including sampling, sample bagging, numbering and tagging, sorting, transportation, security, completion of the analytical submission sheets and Teranga s quality assurance and quality control (QA/QC) program. Teranga s project geologists are responsible for the overall drilling and sampling programs. 23

28 One sample is taken for each one-metre interval drilled by RC and for each two-metre interval drilled by RAB. Jones riffle splitters are used at the drill site to obtain a representative sub-sample. Drill core sampling intervals are defined then cut in half with a diamond saw along the core length. Half core is sampled over approximate one-metre lengths or based on lithology intervals. All samples are placed into sample bags with assigned sample numbers. Sample bags are then closed, sealed and inserted into larger rice bags that are securely sealed. Samples that are sent for assay to the on-site laboratory, (operated by SGS Group Management SA ( SGS )), are securely transported by company trucks. Samples that are sent for assay to off-site laboratories are inserted into large metal drums that are securely sealed, then transported offsite by contract transport trucks to Dakar and either by land transport or airfreight to off-site laboratories. Sample intervals that are not assayed remain in storage at the mine site or exploration camps. Teranga used ALS Chemex in Johannesburg, South Africa, as its primary fire assay laboratory, with additional samples sent to ALS Chemex in Vancouver, Canada. ALS Chemex Johannesburg is accredited to the ISO/IEC 17025:2005 standard by laboratory certificate number T0387, and ALS Chemex Vancouver is accredited to the ISO/IEC 17025:2005 standard by laboratory certificate number 579. Diamond drill core, RC, RAB, soil, and grab samples were sent for gold analysis to the on-site SGS laboratory operated by SGS Minerals as its primary laboratory for atomic absorption analyses (AAS). SGS Sabodala is accredited to the ISO/OEC 17025:2005 standard by laboratory certificate number 812. Dried samples were crushed in the jaw crusher to minus 2.0 mm. Compressed air was used to clean the crusher and splitter between samples, with crushing of barren quartz for additional cleaning as required. Crushed samples were split using a Jones riffle to 200 g. The 200 g sample was pulverized with a ring and puck pulveriser to 85% minus 75 µm (200 mesh). Fifty-gram sample pulps were analyzed for gold using an aqua regia digestion followed by AAS. Due to the periodic backlog of samples at the SGS on-site laboratory, additional samples were occasionally sent to SGS Bamako, Mali, for fire assay analysis with an AAS finish. SGS Bamako, Mali is accredited to the ISO/IEC 17025:2005 standard by laboratory certificate number T0652. During trenching, drilling, logging, sampling, and shipping, multiple data storage systems were employed. Field data were recorded on maps, sample sheets, logging forms, and shipping forms and later entered and stored on the Bransan exploration camp computer server. Hard copies of all field data and core photos were stored on site at the Bransan exploration camp. Chain of custody was strictly maintained during transportation, sample collection, shipping, and preparation to avoid tampering. No evidence of tampering had been identified. In addition to the standard internal laboratory quality control measures employed, a blind QA/QC program was established, consisting of geological standards, blanks, and duplicate samples inserted into the sample stream at regular intervals. Results indicate no evidence of contamination, reasonable to good correlation between original and duplicate samples and no significant issues with specific sample batches or long-term biases. Should any SRM (Standard Reference Material) fail during the analytical procedures, the affected sample batch is re-analyzed with new SRM inserts. As an additional check on analytical results, Teranga sent 179 pulp samples originally fire assayed at the ALS Chemex Johannesburg laboratory to the Bureau Veritas laboratory in Ankara, Turkey, for check fire assay. Bureau Veritas is accredited to the ISO standard 9001:2008 by certificate number NIS All pulp samples were analyzed by fire assay with an atomic absorption finish and a 5.0 ppb detection limit (FA450). Assay results greater than 10 g/t Au were automatically re-assayed by fire assay with a gravimetric finish (FA550), with good correlation of check assay results. During the third quarter of 2014, a high bias in gold assays was generated by the SGS Sabodala site laboratory and was identified by a discrepancy in reconciliation between the daily production reports and the gold poured and gold in circuit at quarter end. The high bias was investigated and determined to have been caused by the degradation in the gold calibration standard due to poor storage of the solutions employed by the laboratory. The bias was corrected in October 2014 and steps were taken to improve the laboratory s internal quality control procedures. Exploration sample assays received from the SGS Sabodala laboratory during this time were examined, with no significant biases identified. Teranga exploration personnel conduct annual laboratory audits of the SGS Sabodala site laboratory, with the most recent audit conducted in January 2015, with no significant issues identified. From 2005 to 2012, independent reviewers completed extensive reviews of data collected, geological knowledge and practices, the on-site laboratory facility, sample analysis, security and QA/QC procedures, as part of their verification of data. Standard industry practices were followed with no significant discrepancies identified. From 2013 through the end of 2016, Teranga has followed established standard industry practice protocols for drilling, core logging, sampling and QA/QC. This included verification of drill hole collar coordinates, downhole surveys, density determinations, logged geology and structure, data entry and assays. The qualified person (as defined in NI ) for Teranga reviewed and 24

29 confirmed the adequacy of samples taken, the security of the transportation procedures, the sample preparation and analytical procedures used. For further details on the Company s sampling, analysis and data verification activities, please refer to Chapter 11 of the Sabodala Technical Report. Mineral Resources Mineral resources were estimated for the Sabodala Mining Concession and the Bransan permit and are shown below. Mineral resources are reported inclusive of mineral reserves. The effective date of the estimate is December 31, The Company expects to update its mineral resource estimate for its Senegalese assets during There have been no revisions to the resource models for 2015, except for adjustments due to mining depletion, minor revisions from infill drilling at Niakafiri Southwest and Maki Medina, remodelling of mineralization at Niakafiri Main, and conversion from a sectional model to a block model at Diadiako. For estimating 2015 mineral resources, Teranga has implemented a new reporting procedure, which includes the use of open pit shells to constrain open pit resources and reporting underground resources separately. For reporting of open pit mineral resources, open pit shells were produced for each of the resource models using Whittle open pit optimization software using the Lerchs-Grossman algorithm. Only classified blocks greater than or equal to the open pit cut-off grades and within the open pit shells were reported. This is in compliance with the CIM resource definition requirement of reasonable prospects for eventual economic extraction. For reporting of underground mineral resources, only classified blocks greater than or equal to the underground cut-off grade outside of the open pit shells were reported. This complies with CIM resource definition requirements. In addition, Deswik Stope Optimizer software was used to generate wireframe models to constrain blocks satisfying minimum size and continuity criteria, which were used for reporting Sabodala underground mineral resources. The qualified person (as defined in NI ) for the mineral resource estimates is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, or political issues that would materially affect the mineral resource estimates. Open Pit and Underground Mineral Resources Summary as at December 31, 2015 Deposit Sabodala Gora Niakafiri Main Niakafiri West Soukhoto Diadiako Subtotal Sabodala ML Masato Golouma Kerekounda Measured Indicated Measured and Indicated Inferred Domain Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au (g/t ('000s) ('000s) ('000s) (g/t Au) ('000s) ('000s) (g/t Au) ('000s) ('000s) (g/t Au) ('000s) Au) Open Pit 13, , , , Underground 1, , Combined 13, , , ,021 2, Open Pit , , Underground Combined , , Open Pit 4, , , , Underground Combined 4, , , , Open Pit 2, Underground Combined 2, Open Pit Underground Combined Open Pit Underground Combined Open Pit 19, , , ,548 8, Underground 1, , , Combined 19, , ,016 35, ,792 9, Open Pit 5, , , Underground 1, , , Combined 5, , , ,097 1, Open Pit 6, , Underground 2, , Combined 8, , Open Pit 1, , Underground Combined 1, ,

30 Measured Indicated Measured and Indicated Inferred Deposit Domain Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au (g/t ('000s) ('000s) ('000s) (g/t Au) ('000s) ('000s) (g/t Au) ('000s) ('000s) (g/t Au) ('000s) Au) Open Pit 2, , Maki Medina Underground Combined 2, , Open Pit Niakafiri SW Underground Combined Open Pit 4, , Niakafiri SE Underground Combined 4, , Open Pit Kinemba Underground Combined Open Pit Kobokoto Underground Combined Open Pit Koulouqwinde Underground Combined Open Pit Kourouloulou Underground Combined Open Pit Kouroundi Underground Combined Open Pit Koutouniokollo Underground Combined Open Pit Mamasato Underground Combined Open Pit Sekoto Underground Combined Open Pit 5, , ,005 45, ,155 1, Subtotal Underground 4, , , Somigol ML Combined 5, , ,500 49, ,650 5, Total Sabodala + Somigol Open Pit 25, , ,777 79, ,703 10, Underground 5, , , Combined 25, , ,516 85, ,441 15, Notes for Mineral Resources Summary: 1. CIM definitions were followed for Mineral Resources. 2. Open pit oxide mineral resources are estimated at a cut-off grade of 0.35 g/t Au, except for Gora at 0.48 g/t Au. 3. Open pit transition and fresh rock mineral resources are estimated at a cut-off grade of 0.40 g/t Au, except for Gora at 0.55 g/t Au. 4. Underground mineral resources are estimated at a cut-off grade of 2.00 g/t Au. 5. Measured resources at Sabodala include stockpiles which total 9.2 Mt at 0.77 g/t Au for 229,000 oz. 6. Measured resources at Gora include stockpiles which total 0.1 Mt at 1.30 g/t Au for 6,000 oz. 7. Measured resources at Masato include stockpiles which total 5.9 Mt at 0.79 g/t Au for 150,000 oz. 8. High grade assays were capped at grades ranging from 1.5 g/t Au to 110 g/t Au. 9. The figures above are total mineral resources and include mineral reserves. 10. Open pit shells were used to constrain open pit resources. 11. Mineral resources are estimated using a gold price of US$1,450 per oz. 12. Sum of individual amounts may not equal due to rounding. Wireframe models were generated from logged drill hole data for topography, oxide, mineralization and significant lithology for use as hard boundaries for bulk density determinations and mineral resource estimation. Classical statistics for raw gold assays were analyzed for modeled mineralized zones to determine appropriate gold grade capping levels. Capping levels were applied to assays prior to compositing to limit the influence of high-grade outliers for all deposits except for Niakafiri West and Diadiako, where management of high-grade assays was not considered necessary. Runlength composites were generated inside mineralization wireframes. Gold assay results reported below the detection limit were assigned half the detection limit. Non-logged and unsampled intervals were assigned a grade of 0.0 g/t Au prior to compositing. Block gold grades were estimated using the Ordinary Kriging, Inverse Distance Squared, Inverse Distance Cubed or Nearest Neighbour estimation method. Except for the Nearest Neighbour method, blocks were estimated using multiple estimation passes using increasingly larger search distances, either based on variograms or visual estimates of grade and geological continuity. 26

31 Resource classification is primarily based on drill hole spacing and continuity of grade. Blocks estimated during the first estimation pass with a minimum of two drill holes and well established geological and grade continuity were classified as measured resources. Blocks estimated during the first or second estimation run with a minimum of two drill holes were classified as indicated resources, where geological and grade continuity has been sufficiently established. Inferred resources were defined with either the second or third estimation run based on the wide spacing of drill holes and resultant uncertainty in geological and grade continuity. In addition, blocks estimated by the Nearest Neighbour estimation method were classified as inferred resources due to the lack of sufficient drilling to confidently determine continuity of geology and grade. For further details on the Company s mineral resources, estimates, results and programs, please refer to Chapter 14 of the Sabodala Technical Report. Mineral Reserves The mineral reserve estimate as of December 31, 2015 and the location of the reserves are shown below. Open pit mineral reserve estimates were prepared for the Sabodala, Gora, Niakafiri Main, Masato, Golouma West, Golouma South, Kerekounda, Maki Medina, Niakafiri SE, and Niakafiri SW deposits. Underground mineral reserves were prepared for the Golouma West 1, Golouma West 2, Golouma South, and Kerekounda deposits. The proven and probable mineral reserves for the deposits are based on only that part of the measured and indicated resources that falls within the designed final pit limits. As there were no measured resources in the Golouma, Kerekounda, Maki Medina, Niakafiri SE, and Niakafiri SW models, only indicated mineral resources were included in these mineral reserve estimates. Dilution and ore loss parameters were applied to each of the resource block models before undertaking open pit optimization work using the Whittle Pit Optimization software. Current pit surfaces and new cut-off grades were used in the dilution comparison. Xstract Mining Consultants of Australia ( Xstract ) has been providing geotechnical expertise and advice for the Sabodala mine, and has developed the appropriate geotechnical model for all the deposits. Annual site visits (and additional inspections when necessary) provide continuous assessment in order to update issues of ground conditions and pit slopes. Xstract provides guidance for operating risks and outlines mitigation plans for the appropriate operating methods and parameters for the entire Sabodala operations. The pit definitions comprise a first stage pit optimization shell and a second stage final pit design. Pit optimization runs were completed using Whittle software based on the Lerchs-Grossman (LG) algorithm for pit optimization. The pit designs were completed using the Vulcan open pit design software. Pit optimization parameters such as mining cost, processing cost, and cut-off grades are applied differently for the various pits because of the variable pit haulage distances from the Sabodala processing plant, oxide and fresh material balance and mining dilution. As part of an anticipated mid-year 2017 updated resource and reserves estimate, Management intends to update all of the existing pit optimization parameters to reflect current cost conditions, additional drilling results where applicable and, update as-built survey surfaces and revised geotechnical slopes where necessary. In addition, the Masato final pit is expected to undergo a revised design optimization process that may apply a higher cut-off grade to provide for a more economic waste and ore profile. Open Pit and Underground Mineral Reserves Summary as at December 31, 2015 Proven Probable Proven and Probable Deposits Tonnes (Mt) Grade (g/t) Au (Moz) Tonnes (Mt) Grade (g/t) Au (Moz) Tonnes (Mt) Grade (g/t) Au (Moz) Sabodala Gora Niakafiri Main Subtotal ML Masato Golouma West Golouma South Kerekounda Maki Medina Niakafiri SE Niakafiri SW Subtotal SOMIGOL Subtotal Open Pit Golouma West Golouma West

32 Proven Probable Proven and Probable Deposits Tonnes (Mt) Grade (g/t) Au (Moz) Tonnes (Mt) Grade (g/t) Au (Moz) Tonnes (Mt) Grade (g/t) Au (Moz) Golouma South Kerekounda Subtotal Underground Total Stockpiles Total Including Stockpile Notes for Mineral Reserves Summary: 1. CIM definitions were followed for mineral reserves. 2. Mineral reserve cut off grades for all deposits, except Sabodala, Masato and Niakafiri Main, range from 0.47 g/t to 0.63 g/t Au for oxide and 0.54 g/t to 0.73 g/t Au for fresh based on a $1,100/oz gold price. 3. Mineral reserve cut off grades for Sabodala, Masato and Niakafiri Main, range from 0.35 g/t to 0.36 g/t Au for oxide and 0.42 g/t to 0.45 g/t Au for fresh using an incremental cut-off grade based on a $1,100/oz gold price. 4. Underground reserves cut-off grades ranged from g/t based on $1,200/oz gold price. 5. Sum of individual amounts may not equal due to rounding. 6. The Niakafiri Main deposit is adjacent to the Sabodala village and relocation of at least some portion of the village will be required which will necessitate a negotiated resettlement program with the affected community members. Location of the Open Pit and Underground Reserves For further details on the Company s mineral reserves, estimates, results and programs, please refer to Chapter 15 of the Sabodala Technical Report. Environmental, Permitting and Social Considerations Teranga is committed to best practice in corporate governance. It has formalized commitments to conduct its business and affairs in accordance with the highest ethical standards by enacting its Code of Business Conduct and Ethics. Teranga strives to comply with all applicable mining code and national and international laws, and adheres to the Extractive Industry Transparency Initiative ( EITI ). 28